USD - The US the retail sales report for May is expected to show some easing in growth after the first months of 2010 showed very strong figures. Retail sales are expected to increase by 0.1% from April to May. The slowdown in retail sales is mainly driven by a drop in gasoline prices, whereas figures for both car sales and chain store purchases are firm - indicating that underlying consumption is on the right track. On Friday the University of Michigan confidence survey is likely to show a decline in consumer confidence. This is primarily a result of the recent financial turmoil stemming from the European debt crisis, which has taken its toll on the US stock markets, thus causing consumers to be increasingly cautious. Furthermore, this week offers quite a few Fed speeches, most notably Bernanke speaking on Wednesday. In addition, Fed's Beige Book is published on Wednesday.
EUR - The euro continues its steady descent lower, breaking below $1.20 for the first time in 4 years. The single currency fell to lows at $1.1878 before recouping some of its losses after German Industrial Orders rose a stronger 2.8%. The relief is likely to be temporary as even European financial authorities appear resigned to continuing euro weakness. A French finance minister commented last week that a weaker euro was good news for the economy. News that the Euro Zone Purchasing Manager's Index continued to make inroads above the 50 threshold indicating expansion, rising to 56.4 in May, was overshadowed by market risk aversion over concerns about Greece and other at risk countries. With the euro continuing to make new lows, the single currency's trajectory continues to be firmly downward.
GBP - The GBP has left the euro and the Danish krone eating its dust in the past week. Investors have been pouring into UK government bonds. It appears that investors are backing the new government's plans to cut the budget deficit and it seems they perceive the risk of a dent in the UK's creditworthiness as having been reduced. However, the UK will probably have to tighten its belt even further if it is to avoid a downgrade of its creditworthiness, and the low level of economic growth will mean a very easy monetary policy in the coming years. The BoE and the ECB will be making policy announcements on Thursday, with neither expected to alter rates. In the case of the BoE, the latest economic data are unlikely to result in any changes to the central bank's judgment of the medium term outlook for growth and inflation. Economic recovery continues at a relatively subdued pace, while inflation, which is currently at 3.7%, is still expected to fall back below the central bank's 2% target over the medium term.
JPY - The Japanese yen weakened despite a decline in the equity markets last week. The key news in Japan would be the resignation of Mr. Hatayama as Japan's Prime Minister - subsequently succeeded by Mr. Naoto Kan who is a prominent proponent for a weaker yen. The news of his resignation brought the yen lower against the majors, trading at a high of 92.89 per dollar during Friday's session. Since, the yen recovered to a low of 90.98 today as investors' worries over the political uncertainty of Japan subsided.
CAD - The CAD fell vs. the USD on concerns over the health of the European economy and on the weak US jobs report last Friday. Lingering doubts of a steady global recovery heightened risk aversion and crude prices hover at a mere $71 a barrel. In a dialogue between BoC Governor Mark Carney and Governor of the Banque de France Christian Noyer, at the International Economic Forum of the Americas/Conference of Montreal, Noyer said the short-term outlook was favorable for Canada. Aside from the uncertainty in the global economy, Canadian employers added 24,700 jobs in May, an increase from a forecasted 15,000. Look to Canada's housing-starts data to be released early this week.
MXN - The Mexican peso remained range-bound as it fluctuated largely on the risk sentiment of the market. The peso came under heavy pressure last Friday, rising to a high of 13.0282 per dollar during the European trading session before falling back to 12.9400 levels. The volatility was contributed by poor US jobs data in which analysts believe could consequently impact trade services in Mexico. The US purchases about 80% of Mexico's exports; therefore, further disappointing US data can be bearish for the peso.
AUD - The Australian dollar slid vs the US dollar amid continuing market risk aversion. Aussie fell to lows overnight at $0.8097, shedding 4% since Friday despite upbeat domestic conditions. Job advertisements jumped 4.3% in May while Q1 GDP was reported last week at a steady 0.5%. Amid an environment of risk aversion, the Aussie is seen as a proxy for risk and as a result, likely set for further declines.